More stories on the airlines’ publicity push to get APD reduced or scrapped …

Date added: March 17, 2012

This goes on and on. The aviation industry complains that they cannot pay tax, or else they will not be able to grow and prosper, and they need to keep their low tax status. They also make out, repeatedly, (and incorrectly) that the UK economy is dependent on having growing air travel, in order to prosper. This week Virgin Atlantic has again joined forces with easyJet, IAG and Ryanair to demand the Government commissions an independent study of the economic effects of Air Passenger Duty. They say it is “fantasy economics to continue to impose such an uncompetitive tax without any analysis of its impact.” Sigh. This again conveniently omits the fact that air travel pays no VAT and no fuel duty, so the overall effective annual subsidy, even taking account of the new rates of APD starting on 1st April, is around £8.5 billion per year. That’s money not paid to the UK treasury for public services etc.Tweet

Here are a few of the many recent articles. The industry has tried to flood the media with its views on APD ahead of the budget on 21st March. There are endless media stories along this theme …

VIRGIN BOSS SIR RICHARD BRANSON ON TAX THAT IS CRIPPLING THE AIR INDUSTRY

Steve Ridgway, Carolyn McCall, Willie Walsh and Michael O’Leary

Saturday March 17,2012

By Peter Cunliffe (Express)

THE Chancellor will unveil his strategy next week for growing the UK ­economy to reduce our crippling budget deficit. The size of the challenge will make many of the measures unpalatable to ­consumers and businesses alike but they must not be counter-productive.

Any further increases to Air ­Passenger Duty (APD) would ­represent a hammer blow to the economic recovery. Through inbound business and tourism, exports and tens of thousands of jobs, aviation should be playing a leading role in that recovery.

Instead, years of above-inflation rises in APD have left us with the highest levels of aviation taxation in the world and this is strangling the economic contribution that the industry is trying to make.

Since 2006 APD rates have risen by as much as 360 per cent, while inflation has risen just 18 per cent. With further hikes due to take effect from April 1, the Government forecasts that its APD tax take will rise from ­£2.6billion to £3.8billion in just four years. Surely the bureaucrats must see you ­cannot keep taking and expect industry to prosper.

This week Virgin Atlantic has again joined forces with easyJet, IAG and Ryanair to demand the Government commissions an independent study of the economic effects of Air Passenger Duty. It is fantasy economics to continue to impose such an uncompetitive tax without any analysis of its impact.

While we battle each other on many fronts, we are absolutely agreed that the damage this tax inflicts on the UK’s economy far outweighs the value of the revenue it raises for the Treasury. It is not a tax on airlines. It is a tax on the flying public, business and trade.

In the year of the London ­Olympics and Diamond Jubilee we are sending the wrong message to the world – we are expensive and difficult to do business with.

The warning signs are there if the Government chooses to see them. As APD receipts rose by 43 per cent between 2007 and 2011, passenger numbers dropped nearly 10 per cent.

Of the three million Chinese tourists who came to Europe in 2010, just 127,000 of them visited us, while Germany, France and Italy all welcomed 500,000 to 700,000. It is hardly ­surprising we are losing passengers to our neighbours when 22 of the 27 EU nations impose no tax on international ­flying. The few that do have set it at less than half the UK level. The Government is putting the UK at a serious disadvantage.

We do not underestimate the challenge faced in tackling the budget deficit but it must not be done at the expense of growth.

The aims of the aviation ­industry and the Government are the same – more tourists, ­business travellers and more trade and exports.

This is why the Chancellor must at least shelve the planned rises in APD while the Treasury urgently commissions an independent study into the full economic impact of this tax on growth.

Sir Richard Branson is ­president of ­Virgin Atlantic Rival airline bosses might be locked in a commercial dogfight but when it comes to Air Passenger Duty (APD) they are flying in formation.

First introduced in 1994, APD is a tax that passengers must pay when flying from a UK airport but what started as a modest levy has gone skywards big time.

A study this month by forecasting consultancy Oxford Economics, on behalf of the World Travel & Tourism Council, claimed scrapping APD would boost the economy by £4.2billion and create 91,000 jobs within the first 12 months.

Walsh and Branson attack UK aviation policy’s effect on growth

British Airway’s Willie Walsh has given a damning verdict of the UK’s current aviation policy, which includes the continued rise in Air Passenger Duty (APD), calling it an “unholy mess”.

Walsh, the chief executive of British Airways and Iberia holding group, IAG, was speaking at the British Chambers of Commerce conference in London yesterday (15 March).

Walsh said the UK has “no aviation policy to speak of” and accused the UK of “falling behind” in developing international air routes “to all the regions in the world that will power our growth in the future”.

He said: “At a time when Air Passenger Duty is already the highest aviation tax anywhere in the world, the Government has increased it by twice the level of inflation.

“Families are now facing taxes of up to £500 by 2016 to fly to some of the most popular holiday destinations.” [If a family of 4 or 5 people can afford a long haul holiday, to destinations over 4,000 miles away, or premium class to a closer destination, they are by definition able to pay a large amount for this holiday, with the tax a tiny component of the overall bill. And there is no VAT and no fuel tax on their long haul trip].

Walsh said APD is “choking off jobs” in the aviation industry, as well as hotels, restaurants and attractions.

He said: “In the past three months of the year, business investment fell by 5.6%. It’s little wonder we have such poor growth when we do so little to make it happen.”

Walsh’s strong comments come days after rival airline-owner Richard Branson told The Sunday Telegraph that Virgin Atlantic is focusing on expansion in America and Australia, causing the UK to miss out of £5bn worth of investment, due to the Coalition Government’s aviation policy.

He said: “We can’t wait for another aviation review. Virgin would be willing to invest £5bn in expansion at Heathrow with new routes and take on thousands of new people [if the Government reversed its position].

“Sometimes brave politicians need to change their mind and we need brave politicians on both sides of the political spectrum to put the country before party.”

BA’s Walsh, Virgin Atlantic’s Steve Ridgeway, easyJet’s Carolyn McCall and Ryanair’s Michael O’Leary rallied together this week on the subject of APD, issuing a second letter to chancellor George Osborne urging him to forgo the planned increases in the tax over the next four years, expected to be announced next month.

In a rare move, the heads of each airline said in a joint statement: “These endless cumulative increases in APD are pricing families out of flying, both from and to the UK.

“That means fewer visitors to the UK, which destroys jobs in our tourism, aviation and hospitality industries and chokes off opportunities for young people at a time of exceptional youth unemployment.”

You could also say that the annual cost of a crate (6 bottles) of good champagne, for a family of four is at least £200, having just one bottle every two months for a small celebration or mood-raiser, chokes off jobs and growth in champagne sales. Which does not seem to be the case.

Air tax hikes will ‘undermine’ Olympics, says BA chief

Willie Walsh, the head of British Airways and Iberia’s parent company, International Airline Group (IAG), has again hit out at the Government’s expected hike in air taxes, saying it will “undermine” the Olympics.

Willie Walsh: chief executive, International Airline Group (IAG)

Walsh said the expected 8% hike in Air Passenger Duty (APD) in April will deter visitors to the UK.

British Airways has paid £40m in sponsorship money to be the official airline partner of the London 2012 Olympic Games.

Walsh told the Guardian: “We’re spending billions on the Olympics. It’s going to create a great showcase – and then we undermine it by raising APD and keeping people away.”

APD is set to rise by 8% in April this year, which will be announced in Chancellor George Osbourne’s budget. Current rates of APD are £12 per passenger for a short-haul flight and between £60 and £85 per person for a long-haul flight.

Yesterday, at the announcement of IAG’s financial results, Walsh said BA had paid “almost £500m in APD” in 2011, and that as a result of the latest increase, the airline reduce the number of new jobs it creates in 2012 “by around half”.

IAG reported a leap in pre-tax profits yesterday, from €84m (£70m) in 2010 to €503m (£421m) in 2011.

However, IAG warned the Olympic Games could impact BA’s traffic this summer.

A spokesperson for the company said: “While the Olympics will be positive for the long term position of London as a global destination, past experience in other host cities suggests that demand could be dampened during the games.”